Should I Incorporate My Buy-to-Let Portfolio in 2026?

Incorporation is the one buy-to-let decision you cannot easily undo. Once properties sit inside a company, taking them back out is a second taxable disposal, so getting it wrong is expensive in both directions. The question is not whether companies pay less tax than individuals (often they do), it is whether that recurring advantage is large enough to justify the one-off cost of getting your portfolio in, and the ongoing cost of running the company afterwards.

Two things have made this question sharper for 2026. First, Section 24 has been fully in force for years now, so most leveraged higher-rate landlords already feel the squeeze of losing full mortgage interest relief. Second, Finance Act 2026 introduced separate property income tax rates from 6 April 2027 that sit above the old income tax rates for higher and additional-rate taxpayers. Both push in the same direction: they widen the gap between holding property personally and holding it through a company. That does not make incorporation right for everyone, but it does mean the decision is worth modelling properly rather than dismissing.

What actually changes when you incorporate

Stripped of jargon, incorporation swaps one tax system for another. As an individual you pay income tax on rental profit and capital gains tax when you sell. As a company you pay corporation tax on profit and corporation tax on gains, then a second layer of personal tax whenever you take money out. Three differences do the heavy lifting in almost every case.

• Mortgage interest. A company deducts 100% of its loan interest before corporation tax. An individual gets only a Section 24 basic-rate tax reducer on finance costs (20% for 2026/27, rising to 22% from 6 April 2027). For a heavily geared landlord this is usually the single largest factor.
• Tax rate on profit. A company pays corporation tax at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief tapering between the two. An individual pays property income tax, which from 6 April 2027 is 22%, 42% or 47% depending on band.
• Getting the money out. Profit left inside a company is taxed once. Profit you draw as dividends or salary is taxed again personally. Incorporation suits landlords who want to retain and reinvest profit far more than those who need to live off the rent.

That last point is the one landlords most often miss. The corporation tax rate looks attractive in isolation, but it is only the first of two layers. The real comparison is your personal tax bill today against corporation tax plus the personal tax on extraction. Our limited company versus personal ownership comparison works through that two-layer maths in detail.

How the April 2027 property income tax rates affect the decision

From 6 April 2027, property income for individuals in England, Wales and Northern Ireland is taxed at its own rates: 22% at basic, 42% at higher and 47% at additional rate. These are enacted law under Finance Act 2026 (Royal Assent 18 March 2026), not a proposal, and only Scotland is outside the new rates (Scottish taxpayers pay Holyrood-set rates on property income). For higher-rate landlords this is a two percentage point increase on rental profit (40% to 42%); for additional-rate landlords it is also two points (45% to 47%).

It is important to be precise about what does not change, because this is widely misreported. The Section 24 finance-cost reducer rises in step, from 20% to 22%, so a basic-rate landlord sees no new wedge between the rate on their rent and the relief on their interest. The change bites on higher and additional-rate landlords, whose relief stays far below their headline rate. A company is unaffected by all of this, because it never enters the property income tax system in the first place. That widening gap is the core of the "incorporate in 2026" argument, and it is genuine, but it is a reason to model carefully, not a reason to rush. The rates apply to ongoing rental profit, so they reward incorporation that is already in place; they do not impose a deadline on the transfer itself.

For the underlying rules and worked figures behind the new bands, see our guide to the 2027 property income tax rates for landlords.

Personal ownership versus a limited company: the side-by-side

The table below sets out the practical differences. None of these factors decides the question alone; incorporation is a balance of all of them against your circumstances.

Factor	Personal ownership	Limited company
Tax on rental profit	Property income tax: 22% / 42% / 47% from 6 April 2027	Corporation tax: 19% up to 50k, 25% above 250k, marginal relief between
Mortgage interest relief	Restricted under Section 24 to a basic-rate reducer (20%, rising to 22% from April 2027)	Fully deductible as a business expense
Getting profit into your pocket	Already yours after income tax	Second layer of tax on dividends or salary when extracted
Cost of moving the portfolio in	Not applicable (you already hold personally)	CGT at 18% / 24% on the gain and SDLT including the 5% surcharge, unless reliefs apply
Capital gains on a future sale	CGT at 18% / 24%, with the £3,000 annual exempt amount	Corporation tax on the gain; no annual exempt amount
Mortgage availability and pricing	Wider lender choice, generally lower rates	Narrower commercial market, usually higher rates and personal guarantees
Making Tax Digital for Income Tax	In scope once gross income crosses the threshold	Outside MTD for Income Tax entirely
Ongoing administration	Self-assessment return	Annual accounts, CT600, confirmation statement, director duties

The cost of getting in: CGT on transfer

This is where most incorporation plans either succeed or quietly fall apart. When you move a property into your own company, HMRC treats it as a disposal at market value, even though you receive no cash, because you and the company are connected persons. The latent gain (today's value less your original cost and allowable improvements) is chargeable to capital gains tax at 18% for any part falling in your basic-rate band and 24% above it, with the £3,000 annual exempt amount available once.

Consider a landlord who bought a flat for £200,000, now worth £300,000. The £100,000 gain, after the £3,000 exemption, leaves £97,000 chargeable. For a higher-rate taxpayer at 24%, that is a real CGT cost on a transfer where no money has actually changed hands. Multiply that across a portfolio and the upfront bill can dwarf several years of corporation tax advantage. This is why incorporation is so often the right answer for newly acquired or low-gain portfolios and the wrong answer for long-held, pregnant-with-gain ones.

The principal relief is Section 162 incorporation relief (TCGA 1992 s.162). Where you transfer a genuine business as a going concern, wholly or partly in exchange for shares, the gain is rolled into the base cost of those shares rather than taxed now. The decisive word is "business". Passive buy-to-let investment is not automatically a business; HMRC expects evidence of substantial, active management, and the threshold from Ramsay v HMRC is the reference point. A part-time landlord with two lightly managed flats is unlikely to qualify; a landlord running a multi-property portfolio with significant weekly hours and systems has a stronger case. Because the relief is fact-sensitive and frequently scrutinised, it should never be assumed. Our guide on how to incorporate a rental property without CGT sets out the conditions, and the mechanics of valuing and reporting the transfer are covered in our note on calculating CGT on a transfer to a limited company.

The other cost of getting in: SDLT

Capital gains tax is only half the entry bill. A transfer of residential property to your company is also a land transaction, and the company pays stamp duty land tax on the market value. Because a company is treated as owning additional dwellings, the 5% additional-dwellings surcharge applies on top of the standard residential rates (FA 2003 Sch 4ZA, surcharge raised to 5% from 31 October 2024). For higher-value dwellings there is a further trap: a company acquiring a single dwelling worth more than £500,000 can fall within the 17% flat rate and the Annual Tax on Enveloped Dwellings (ATED), unless a relief such as the property-rental-business relief applies and is properly claimed.

SDLT, unlike CGT, has no equivalent of Section 162 relief for a sole owner. The one meaningful exception is a transfer from a genuine partnership to a connected company, where the partnership SDLT provisions in FA 2003 Sch 15 can reduce or remove the charge if the connected-partner conditions are met. This is precisely why landlords who have run a long-standing, properly constituted property partnership sometimes have an incorporation route that a sole owner simply does not. It is also an area HMRC examines closely, so the partnership must be real and predate any incorporation plan, not assembled to manufacture the relief.

Take CGT and SDLT together and the practical rule is simple: the cheaper it is to get the portfolio into the company, the better incorporation looks. A landlord with low gains and a route to partnership SDLT relief is in a very different position from one transferring decades-old, heavily appreciated properties as a sole owner.

Who incorporation tends to suit (and who it does not)

It is more useful to think in terms of profile than portfolio size, because two landlords with the same number of properties can land on opposite answers depending on their borrowing and tax band.

The strong case. A higher or additional-rate taxpayer, with significant mortgage interest hit by Section 24, who intends to hold for the long term and reinvest profit rather than draw it out, and whose properties carry modest latent gains or can use Section 162 and partnership SDLT relief. Here the full interest deduction, the corporation tax rate and the ability to retain profit compound year after year, while the entry cost stays manageable.

The weak case. A basic-rate taxpayer with little or no borrowing, who relies on the rental income to live, holding long-owned properties with large pregnant gains as a sole owner. The corporation tax advantage is thin, Section 24 barely affects them, the cost of extracting cash erodes what little benefit exists, and the CGT and SDLT entry bill can be ruinous. For this landlord, doing nothing is frequently the right and cheapest answer.

Most real portfolios sit between these poles, which is exactly why a generic threshold ("incorporate above X profit") is misleading. Our deeper treatment of when to incorporate a property portfolio works through the timing trade-offs in more detail.

Alternatives worth weighing first

Incorporation is not binary, and it is rarely the only lever.

The hybrid: keep what you own, buy new through a company

Leaving your existing properties in personal ownership while routing every future purchase through a company avoids any CGT or SDLT on the portfolio you already hold, yet still gives full interest relief and corporation tax treatment on new acquisitions. For landlords still growing a portfolio, this captures most of the upside without the entry cost. The price is running two structures and two sets of records.

Rebalancing with a spouse

Transfers between spouses and civil partners are made on a no-gain, no-loss basis for CGT (TCGA 1992 s.58). Moving a share of a property to a lower-earning spouse can shift rental profit into unused basic-rate band, easing the personal tax bill without any company. It only helps where there is genuine spare band, it does not remove Section 24, and a Form 17 election is needed to depart from the 50/50 default for jointly held property. Treat it as a complement to, not a replacement for, the incorporation question.

Doing nothing, deliberately

For many basic-rate landlords with low gearing, the honest professional answer is to stay personal. The administrative simplicity, the annual exempt amount on a future sale, and the absence of an extraction layer can outweigh a small corporation tax saving. "No change" is a legitimate, often correct, recommendation.

Mortgages, lending and the financing reality

Most personal residential buy-to-let mortgages cannot simply be assigned to a company. Incorporation in practice means remortgaging each property in the company's name, on commercial limited-company terms. That market is narrower than the personal one, generally priced higher, and lenders almost always require personal guarantees from the directors. The full deductibility of company interest often still wins for a leveraged higher-rate landlord, but the higher headline rate is a real cost that belongs in the model, not a footnote. For a lightly geared basic-rate landlord, the extra finance cost can be the factor that tips the decision against incorporating at all.

Making Tax Digital and the compliance angle

Making Tax Digital for Income Tax (MTD for ITSA) is now live for individual landlords on a staged basis: mandatory from 6 April 2026 where gross property and self-employment income exceeds £50,000, from 6 April 2027 above £30,000, and from 6 April 2028 above £20,000. In scope, it means digital record-keeping and quarterly updates to HMRC rather than a single annual return. Companies are outside MTD for ITSA entirely; they file an annual CT600 instead.

MTD is not, on its own, a reason to incorporate, and treating it as one is a mistake. But if the wider analysis already points towards a company, leaving the MTD ITSA quarterly cycle is a genuine secondary benefit. If you are staying personal, our guide to the MTD for landlords deadlines explains what compliance looks like.

How to approach the decision in 2026

The right sequence is the same for every landlord, even though the answer differs. Work out your true marginal position after the Section 24 add-back. Price the one-off CGT and SDLT cost of moving the portfolio in, and test whether Section 162 and any partnership SDLT relief realistically apply to you. Model the recurring company position, including the tax on extracting cash, against your personal position. Then layer in finance costs and the ongoing administration. Only if the after-extraction company position beats your personal one by a clear margin does incorporation earn its place.

One worked example from our own client base illustrates the trap. An anonymised four-property landlord, all bought within the last few years and heavily mortgaged, found the recurring corporation tax case compelling on paper. The deciding factor turned out to be SDLT: because the properties had risen sharply since purchase, the surcharge on their current market value made full transfer uneconomic in a single year. The recommendation was a hybrid, keeping the existing four personal and incorporating new purchases, which captured the forward benefit without the prohibitive entry bill. The lesson is that the headline tax comparison rarely decides the case on its own; the entry cost does.

Because the transfer is largely irreversible, the reliefs are fact-sensitive, and the SDLT and CGT consequences are unforgiving of mistakes, this is a decision to confirm with a specialist before you move a single property. A clear view of your CGT exposure and an honest read of whether your activity is a business for Section 162 purposes are the two foundations everything else rests on.